Are We Experiencing A ‘Creative Apocalypse’ Post Toys R Us Downfall?

ARE WE EXPERIENCING A ‘CREATIVE APOCALYPSE’ POST TOYS R US DOWNFALL?

The global toy business has been reaching new heights in terms of creativity in recent years.

While we may have been seeing ever more formulaic blockbuster movies with ever more sequels and prequels at the box office, away from movie based toys, I would argue that we have not had a broader range of toy products on sale in the 20 years I have been in the toy business.

There are several drivers for this veritable plethora of toy offerings, but not least of which has been the huge impact of social media and the internet on content distribution and product launch platforms. It has never been easier to go direct to consumer with both content and physical products to prove out demand before mainstream retail needs to adopt/buy in.

So could we be at the start of a short term correction of this creative utopia, largely due to the same phenomenon – the internet revolution & social media? It certainly seems like these very media which have facilitated such a healthy creative atmosphere have at the same time been part of dealing a major blow to the very retailers who are the best supporters of product innovation i.e. the specialist retailers. By making everything purchaseable online with easy price comparison & the devaluing of specialist retail that entails, the move of demand from physical to digital retail has shaped up as an existential challenge for specialist physical retail.

We’re clearly currently getting smashed by the biggest of all physical retail failures in the shape of Toys R Us – THE iconic global specialist toy chain. I’m not going to harp on again here about the role of leveraged buyouts & crippling interest payments resulting – that has all been said, but there is no escaping the fact that the loss of the world’s number one toy retail specialist chain is going to have a seismic impact on the toy business.

Now before I go all ‘doom & gloom’ let me first just reiterate that a). children will still want to own & play with toys b). parents have never, in my 20 years in toys been generally more encouraging of play with toys vs excessive screen time addiction for their children c). the global toy market is still set to grow significantly in the medium to long term due to global demographics i.e. growing population/birth rate = more kids = more toys sold. d). accelerating economic development in the worlds 2 most populous nations – China & India.

So the reality is the mid to long term macro outlook for the global toy business is looking very good.

Nevertheless…in the past few weeks as the TRU situation has unfolded it has become abundantly clear that the pendulum of risk outlook for toy companies is swinging very much towards the risk averse.

Now taking a historical perspective, the toy industry wasn’t in the end as badly affected by the global financial crisis of the late noughties as was feared at the time, as parents tend to cut back on spending on their kids last, so gobally the industry did not shrink even (from a global perspective) during those tough days of economic gloom…however, many companies did cut back on product development and new launch investments, and appetite for taking risks diminished. Perversely, one of today’s biggest trends in toys has roots in the financial crisis – that being the increase in major global toy companies interest in ‘pocket money’/collectable toy ranges. There was a point in time when the low price of this kind of item made this type of product less interesting for major toy companies – whereas today, every global toy company tends to have a significant interest/committment to this category.

So when we fast forward from the global financial crisis to the (short term) post Toys R Us outlook, we can see some similarities in reaction to systemic bad news. In the past few weeks I have spoken to c. 30-35 different toy companies in the USA, Europe & Asia, and nearly all of them has told me of a reduced risk appetite in some shape or form, which is manifesting itself in cancelled postponed product development initiatives. Products which previewed well enough pre Christmas/through toyfair season may not get to shelf, at least not in 2018. Development spending, product development slots and new launch marketing for 2019 looks likely to be at least somewhat curtailed while the global toy industry gets used to the ‘new normal’ post Toys R Us situation.

Clearly the types of products which get through product selection processes are now more likely to reflect the needs & demands of more mass market, multi category retailers in the predicted absence of TRU as a global player. And the accepted wisdom is that these ‘box shifting’ retailers are less interested in innovation and less likely to take a risk. That’s clearly a debatable point in some ways, but the reality is toy companies themselves often make such perceptions self fulfilling via presumption.

So, to the somewhat hysterical question in the title of this article – are we therefore in the midst of a ‘creative apocolypse’ in toys?

I actually don’t think so, because the positive impact of the internet & social media is not going away. Consumer led products and quirky content based product lines are here to stay…these will continue to push the creative boundaries, and children are increasingly watching user genrated content, Netflix and YouTube, so this trend will continue. The challenge for toy companies is that we are in the process of losing a global support base for taking niche/social media driven products from the digital world to mainstream physical toy retail which can clearly accelerate sales volumes.

These are troubling times, no doubt – clearly the Toys R Us situation is going to adversely affect more than the (reported) 30,000 employees of Toys R Us. Cuts or shall we say ‘postponements’ in product development are clearly imminent – at least short term, which will also be likely to have an adverse effect on employment globally.

However, on a brighter note, as per the phenomenal growth of pocket money collectable toys coming out of the global financial crisis, some toy companies will choose to ‘bite down on the mouthguard’ and keep swinging metaphorical punches against the prevailing climate, and these companies will most likely come out ahead when the short term disruption is adapted to as the mid term outlook is so bright for the global toy industry.

Which seems like a good opportunity to use one of my favourite quotes:

“The Chinese use two brush strokes to write the word ‘crisis.’ One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger–but recognize the opportunity.”

John F. Kennedy

 

Another notable disruptive trend is also currently slipping under the radar in terms of Toy manufacturing, as China – the world’s leading toy manufacturing hub of the last few decades seeks to move away from low priced items like toys and further upmarket. This article looks at how & where this toy manufacturing is being replaced, to read, click here:

https://www.toyteamindia.com/single-post/2018/04/06/Toy-Manufacturing—2018-Update-India-on-the-up-Chinas-transition

 

by Steve Reece, CEO of Kids Brand Insight www.KidsBrandInsight.com,  a leading toy expert consultancy to toy companies around the world. Specialities include Sourcing/factory finding especially in India & other ‘new’ manufacturing economies, brand development and product representation.